Facility Agreement Template for the United Arab Emirates

A Facility Agreement is a comprehensive legal document that governs the relationship between lenders and borrowers in the United Arab Emirates. This agreement establishes the terms and conditions under which financial institutions provide credit facilities, whether for term loans, revolving credit lines, or multi-purpose financing arrangements. Under UAE law, these agreements must comply with specific regulatory requirements and incorporate provisions that protect both parties while ensuring enforceability in UAE courts.

When do you need this document?

You need a Facility Agreement when your business requires substantial financing from banks or other financial institutions in the UAE. This document is essential for corporate lending arrangements, real estate financing, trade finance facilities, and working capital loans. Whether you're a UAE company seeking expansion capital, a foreign entity establishing operations in the Emirates, or a financial institution structuring complex lending arrangements, this agreement provides the legal foundation for your transaction. The document is particularly crucial when multiple parties are involved, such as syndicated loans or facilities requiring guarantors and security providers.

Key legal considerations

The agreement must clearly define the facility amount, purpose, and availability period while establishing robust conditions precedent for drawdown. Security arrangements require careful structuring under UAE Federal Law No. 20 of 2016, particularly when involving movable assets or cross-border collateral. Representations and warranties must be comprehensive yet realistic, covering financial condition, legal capacity, and regulatory compliance. Events of default clauses should be precisely drafted to avoid disputes while providing adequate protection to lenders. For Islamic finance structures, the agreement must incorporate Sharia-compliant provisions and may require approval from internal Sharia boards. Interest rate mechanisms, fee structures, and repayment terms must align with UAE Central Bank regulations and market practices.

Legal requirements in United Arab Emirates

UAE Federal Law No. 18 of 2017 (Commercial Transactions Law) governs the fundamental aspects of commercial lending and banking operations within the Emirates. All facility agreements must comply with UAE Federal Law No. 14 of 2018 (Central Bank Law), which regulates banking activities and sets mandatory requirements for financial institutions. The agreement must be executed in accordance with UAE Federal Law No. 5 of 1985 (Civil Transactions Law) to ensure enforceability. When securities are involved, compliance with UAE Federal Law No. 4 of 2000 (Capital Markets Law) may be required. The document must designate a UAE process agent for foreign entities and specify UAE courts' jurisdiction for dispute resolution. All parties must have proper legal capacity and corporate authorization under UAE company law, with foreign entities requiring appropriate registration or licensing within the Emirates.